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Puget Sound Energy CEO Leads Off Energy Management Congress

The West Coast Energy Management Congress took place in Seattle this year. It is one of the largest — maybe the largest — energy conference and technology expo event for commercial and industrial energy managers. The organizer, the Association of Energy Engineers, joined forces with Puget Sound Energy to bring together local and national speakers on energy efficiency, facility optimization and sustainability.

The EMC agenda includes a two-day conference and expo, multiple tracks of education sessions, and several intensive seminars. PSE’s Director of Customer Energy Management, Bob Stolarski, chaired the opening session.

More energy supply than PSE knows what to do with

The job of keynote speaker Steve Reynolds, CEO of Puget Sound Energy, was to welcome attendees to EMC. His utility is the conference’s host sponsor. PSE serves over a million electric customers and nearly that many gas customers.

Reynolds comfortably set the stage for the two days that would follow. He spoke of the challenges, real and imagined, that face utilities like PSE. As top executive of a vertically integrated utility — with both generation and distribution resources — Reynolds talked of his excitement about the dramatic changes coming to renewable energy and the smart grid.

“What we’re seeing across our state is the broader integration of renewable resources into our supply mix,” Reynolds says. Hydroelectric power represents the majority of PSE’s energy. Reynolds calls hydro a “wonderful, renewable resource, although it’s not defined that way in state law.”

PSE has also invested in two major wind farms, and has about 600 customers who are net-metering the output from their distributed solar energy systems.

Reynolds recounted the hour-to-hour challenges of serving loads with intermittent generation sources. But he dismisses the myth that intermittency limits the potential of renewable energy. Often, he explains, as one wind farm starts to slow down, another is ramping up toward its peak.

“What you see when you get to scale, even with an intermittent resource like wind, is that there is diversity,” Reynolds says. “What we’re beginning to see is that diversity happening, and we will have a much more stable resource than the naysayers have suggested.”

As for a shortage of energy supply, Reynolds admits it is not presently the case in the Pacific Northwest — at least, not today.

“With all the rain we’ve had in the past month, we’ve virtually cut back almost every other resource in the region,” Reynolds says. “We have more power than we know what to do with.”

With all the talk of smart grid, Reynolds could hardly ignore the topic in his keynote address. PSE deployed smart meters a decade ago, and was considered a pioneer in automated meter infrastructure and related policies in the United States.

“The definition of the smart grid is like pornography,” Reynolds jokes, “it’s in the eye of the beholder.” He defines it as improving the intelligence provided to the ultimate users of energy with regard to the choices they make.

There is much more that can be done to display and communicate energy information, Reynolds says. He sees more long-term opportunities in the smart grid is to influence the behavior of consumers toward the prudent use of energy.

With more than 100 million households in the United States, those opportunities stand to make innovative companies rich — but they face some challenges if they depend on utilities to adopt new technologies.

“One of the real problems is that any new technology has implementation issues,” Reynolds says. “I’m not sure I’d want to buy unit one of any new technology. I’ll be happy buying unit 10, especially as a regulated utility where there’s a regulator waiting for the ‘gotcha.’”

Making technologies work together is a high priority for the smart grid, Reynolds says. Understand the implementation timeframes at scale, and communicate about the transition, he advises.

Your home doesn’t know you’re away, but your Hohm might

Rob Bernard, Microsoft’s Chief Environmental Specialist, says the Northwest has an opportunity to set examples for the rest of the world. His job at the podium was to outline Microsoft’s grand view of our energy future.

“Why is Microsoft involved in this? We made the decision that we would take an approach to environmental sustainability much along the lines of what we’ve done with healthcare, education, and entertainment,” Bernard says.

What those industries have in common is their long-term cycles of change, he explains. By investing in sustainability, Microsoft hopes to accelerate those cycles by overcoming technology challenges.

To illustrate the challenges, Bernard uses the example of data centers. Microsoft provides internet-based services, which require large data centers. As Microsoft makes its data centers more energy efficient, their proliferation is zeroing out the net benefit.

“As we double the efficiency of our data centers, we double the number of data centers,” Bernard says. “So we’ve launched a series of guides to engineers about how to write more energy efficient and energy aware code.”

Microsoft thinks, on an ongoing basis, about how technology will change the way people live, says Bernard. One area of thinking is in radical improvements in energy efficiency, both inside and outside the information technology industry.

No surprise, Microsoft’s contribution in this area will be in information technology — in this case, the management and transparency of information about energy use and carbon. Of all IT managers, Bernard claims, 85 percent do not know how much energy their department consumes. The same is true, he says, of homeowners.

“If Steve Reynolds were to call 500 of PSE’s customers and ask how much they spend on energy, I don’t think more than 15 or 20 percent would really know,” Bernard speculated. “When I talk to consumers, that’s their response.”

Residential energy consumers and data centers are Microsoft’s primary focus sectors, but the company is also thinking about how to apply cheap storage and processing power to solve larger problems. Models of climate change and the resulting species migrations and extinctions, Bernard says, are so complex that they can take a month to run.

Microsoft is trying to reduce its own waste and carbon footprint — and that of its supply chain. Microsoft has over 400,000 partners worldwide, Bernard says, adding: “I would argue that any company that is not thinking about [energy efficiency in their business] will not be a Microsoft partner within the next decade unless they evolve and change their business model.”

Aside from energy, waste in a software company is nominal compared to a company with physical product to manufacture and ship. Water use, for example, is difficult to reduce without changing the water delivery infrastructure.

“Why would I need the same quality of water to drink, shower with, and cool a data center with?” Bernard asks. “It’s because that’s the way the infrastructure is. So we’re looking at how do you change the infrastructure.”

“Everyone has one of these,” he points out, pulling a cell phone from his pocket. “Why is it that this knows I’m here, but my office and home do not? It has a lot of implications for power usage.” Bernard is alluding to capabilities under development for several years by various standards organizations, with support from associations such as BOMA and CABA. Players like Google, Apple, Intel and Microsoft have been joining the fray lately.

In fact, most major software vendors are tossing around ideas about how the smart grid and energy-efficient home could be more dependent on their (mostly proprietary) products. Microsoft is no exception, and its worldview is outlined in its “Smart Grid Reference Architecture” issued in the fall of 2009.

NPV-positive efficiency measures can save as much energy as Japan uses

Speakers thus far in the opening session have talked about the big opportunity for energy efficiency, without being very specific. If PSE said, “we’ll need it,” and Microsoft said, “we’ll sell it,” then it was up to Adrian Booth, Analyst with McKinsey & Company, to define “how much.”

Booth presented findings from his firm’s 2009 report on energy efficiency. The report analyzed hundreds of commercially available energy efficiency measures and compared them to find economically advantageous opportunities — those measures that are net-present-value positive.

“No news to anyone in this room,” Booth says, “energy efficiency is a big opportunity and a significant resource.” But, he adds, “there are significant and persistent barriers, many of which have been known for years.”

Booth suggests that we have been missing a systematic way to look at the opportunities and overcome the barriers. Taken together, the opportunities can produce $1.2 trillion in benefits from 2008 to 2020.

The benefits are possible with an up-front capital investment $520 billion, Booth says. The financial gains are derived from a reduction in energy consumption of 9.1 quadrillion Btus.

“That’s more than the energy consumed in Canada or Japan,” Booth explains. “The 1.1 gigaton carbon reduction is more than all of the carbon we would abate from reducing deforestation.”

The McKinsey base model assumed no cost of carbon, Booth notes, but a variation of the analysis with a $50 per ton price on carbon would increase the opportunities by 13 percent.

The industrial segment represents 51 percent of projected energy demand and 40 percent of the energy efficiency opportunities McKinsey studied. Much of that is in an energy-intensive sector with relatively few enterprises. The residential segment represents 35 percent of the energy efficiency opportunities, but is highly fragmented across 129 million homes and 2.5 billion devices.

The commercial segment represents 18 percent of energy demand, but 25 percent of energy efficiency opportunities, Booth says. About half of existing buildings are challenged with split incentives. Enacting energy efficiency measures in a new buildings costs about half as much as retrofitting. Data centers are becoming an increasingly important opportunity, he says.

As for addressing these opportunities, Booth outlines several key strategies. Among them is alignment among regulators, customers and utilities: “The utility is a very important player in this scenario. We need to do more than removing the disincentive around energy efficiency.”

The West Coast Energy Management Congress was presented by the Association of Energy Engineers and hosted by Puget Sound Energy, at the Washington State Convention & Trade Center, June 15-16, 2010.

Note: This is a seattlepi.com reader blog. It is not written or edited by the P-I. The authors are solely responsible for content. E-mail us at newmedia@seattlepi.com if you consider a post inappropriate..